Nordstrom shares fall 8.7% after JPMorgan analyst downgrade

By

Kate Dingwall

Published
Dec 20, 2016

Nordstrom Inc. saw the largest fall in seven months in its stock price this week, seeing an intraday drop of 9.2 percent. The nosedive occurred right after a JPMorgan Chase analyst downgraded Nordstrom's stock due to Nordstrom's costs outpacing sales.

Analyst Matthew Boss downgraded Nordstrom’s stock from neutral to underweight, the equivalent of sell, cutting the 12-month target share price from $55 to $48 in the process. Boss noted that the brand had foreseen ‘no silver bullets’ left to drive growth.

Despite the Q3 results exceeding expectations, Nordstrom has been in the middle of a rough patch. Earlier this year, Nordstrom saw rounds of high-profile layoffs and several quarters of less-than-expected sales. 

Nordstrom’s faltering e-commerce presence has been a notable contributing factor to the downgrade. While 20 percent of Nordstrom sales are via e-commerce accounts, in recent months e-commerce costs have outpaced sales. Nordstrom has continued to invest in driving customer traffic online while leaving brick-and-mortar locations with non-existent e-commerce infrastructure behind. The retailer has also been investing hugely in its online presence and its mobile app features, leading to an increase in Nordstrom.com sales but chipping away at sales from the physical locations.

Two years ago, Nordstrom Inc. purchased online styling service Trunk Club for $350 million. The luxury conglomerate also owns flash-sale online website site HauteLook. The retailer has also made a big push over the last two years to expand to Canada.

Macy's, Nordstrom, and other retailers floundered this year after consumers moved their purchasing from discretionary items like designer beauty and ready-to-wear, over to gadgets like smartphones and televisions. While Nordstrom saw the biggest drop in its share price, Macy’s Inc., J.C. Penney Co, and Kohl’s Corp all also watched their stocks decline 6% this week, making it a grim week for department stores on the market.